For the past several years, John Addams has operated a part-time business from his home. As of April 1, 2002, John decided to move to rented quarters and to operate the business, which was to be known as Addams & Family Inc., on a full-time basis. Addams & Family entered into the following transactions during April: April 4 The following assets were received from John Addams: cash, $10,000; accounts receivable, $1,500; supplies, $1,250; and office equipment, $7,500. There were no liabilities received. April 4 Paid three months' rent on a lease rental contract, $4,500. April 4 Paid the premium on property and casualty insurance policies for the year, $1,800. April 6 Received cash from clients as an advance payment for services to be provided, $3,000. April 7 Purchased additional office furniture on account from Morrilton Company, $1,800. April 8 Received cash from clients on account, $800. April 11 Paid cash for newspaper advertisement, $120. April 12 Paid Morrilton Company $800 for debt incurred on April 7. April 15 Recorded services provided on account for the period April 4-15, $2,250 April 15 Paid part-time receptionist for two weeks salary, $400. April 15 Recorded cash from cash clients for fees eamed April 4-15, $3,175. April 18 Paid cash for supplies, $750. April 22 Recorded services provided on account for April 18-22, $1,100. April 22 Recorded cash from cash clients for fees eamed April 18-22, $1,850. April 25 Received cash from clients on account, $1,600. April 27 Paid part-time receptionist for two week's salary, $400. April 28 Paid telephone bill for April, $130. April 29 Paid electric bill for April, $200. April 29 Recorded cash from cash clients for fees earned April 25-29, $2,050. April 29 Recorded services provided on account for April 25-29, $1,000. April 29 John received $4,500 from the company as his salary. Instructions: (The first transaction has been recorded and postod for you). 1. Record the transactions stated above in good general journal form. 2. Post the transactions to T-accounts. 3. Record and post the following adjustments: a. Insurance expired in April, $150. b. Supplies on hand April 29, $1,020. c. Depreciation for the office equipment in April, $500. d. Accrued receptionist salary on April 30, $20. e. Rent expired in April, $1,500. 1. Earned $2,000 of services that were previously paid for on 4/6. 5. Prepare an Income Statement, Statement of Retained Earnings and Balance Sheet. 6. Record and post closing entries. 7. Prepare a post-closing trial balance.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
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